Justice or economics?

It’s that time of year again: The time of year to recover from lingering hangovers; to implement those pesky new year’s resolutions; and to, er, parole or pardon the depressingly long roster of corporate criminals. Voices have been rising in the ruling party and the administration for the president to exercise her right to grant paroles and/or pardons to these white-collar wrongdoers. And there are a lot of them ― almost a “Who’s Who” of Korea Inc’s elite.

Tycoons attending the boardroom behind bars include (deep breath): SK Group Chairman Chey Tae-won and his younger brother, both serving raps for embezzlement; CJ Group Chairman Lee Jae-hyun for embezzlement, breach of trust and tax evasion; LIG Group Chairman Koo Bong-sang, for defrauding investors; Tongyang Group Chairman Hyun Jae-hyun for a billion-dollar-plus fraud; Taekwang Group Chairman Lee Ho-jin for embezzlement and breach of trust; and ex-STX Chairman Kang Duk-soo, for embezzlement and accounting fraud.Given that these gentlemen knew what they were doing when they committed their crimes; given that they are entitled, privileged and otherwise unaccountable; and given that Korean chairman have an appalling record of committing crimes then being pardoned ― why should they be released?

The head of the Korean Chamber of Commerce and Industry said, in an interview with this newspaper, that Chey should be released because he has served over one third of his sentence. Naturally, we should expect the head of the KCCI ― the big business lobby group ― to champion big businessmen, but I do not find his argument at all compelling. (Particularly given that this is Chey’s second sojourn behind bars.)

More problematically, that old saw ― that chairmen must be released for the good of an economy which is, apparently, “in the doldrums” has been aired yet again ― by no lesser a personage than the head of the ruling Saenuri Party, who notes that only top chairman can make major investment decisions. This is problematic for three reasons.

First: Korea’s economy is moving at a pretty fair clip: The country anticipates GDP growth for 2014 of 3.4 percent, and 3.8 percent this year. For an advanced economy, these are no “doldrums.”

Second: Should massive business groups be beholden to jailed chairmen? Are there no other persons (eg CEOs) or bodies (eg boards of directors) which can take important decisions? And if not ― why not?

Third: Should grateful chairmen, freshly out of pokey, order the injection of a few trillion won worth of capital into the economy in return for their personal freedoms, rather than for any pressing business needs? This smacks of moral hazard ― bribery, even.

An even broader, more fundamental question faces Korean society ― one raised (I would guess inadvertently) by the ruling party spokesman, who stated: “We urge the government to deeply agonize over the issue, given the two criteria of economy and law.”

This is the big question. What should take precedence: justice or economics?

It must be justice. If there are no clear rules to govern society, and mechanisms to enforce then, then we have a recipe for opacity, unfairness, money/power abuse, and ultimately anarchy or revolution.

And the judiciary is the only force reigning in chaebol chairmen. While the National Pension Service consistently threatens to hold corporations to account, shareholder activism is rare in Korea, and understanding of shareholder’s rights is weak. Thus there is no internal, institutional brake ― “economic democracy” ― on the dubious practices of hereditary chairman.

While the media, have on occasion, called corporate royals to account (a good example being the ongoing “Heathergate” farce) Korean press insiders say, off the record, that chaebol wield major power with their advertising budgets ― power that can shift editorial stances.

Then we have the regulators, who have, when it comes to dealing with corporate crime, shown either lack teeth, or failure to bite. And as noted from the voices inside Saenuri Party, chaebol ruling families ― arguably the most powerful players in the Korean establishment ― have plenty of allies/protectors in high places.

That leaves justice as the last resort. The right to parole or pardon is a presidential prerogative, but Ms. Park has to exercise that power via the Justice Minister (who she appoints). If he does, indeed, release these criminals on the grounds that economics trump justice, then surely he is heading the wrong ministry?

If we see the cells of corporate criminals flung open early in the new year, I humbly suggest the Minister of Justice be immediately reassigned as Minister of Strategy and Finance. Happy 2015!

Andrew Salmon is a Seoul-based reporter and author. Reach him at andrewcsalmon@yahoo.co.uk.

Guest Speaker Mr. Hemant Amin, Founder, Chairman and CEO of Asiamin Capital, a single family office, and Founder and Chairman of the BRKets investor groupMarch 17th, 2015

Hemant, a big thank you for educating and inspiring the next generation of leaders. You are a rare positive role model in the Asian capital markets and you showed the students that it is possible to create value because one has the right values and mindset like Buffett and Munger! :)